Part 3: Organizing
Management Theory and Practice
Topics
Covered
Instructor: S.M.Fahim
E-mail:
fahim@cuonline.net.pk
fm_910@hotmail.com
Mobile:03009542121
•Six elements of
organization structure
•Mechanistic and organic
organizational forms
•Factors affecting
structure
•Organization design
applications
•Organizational culture
Organzing --- S.M.Fahim
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Organzing --- S.M.Fahim
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Some Purpose of Organizing
• Divides work to be done into specific jobs
• Assigns tasks and responsibilities associated with
individual jobs
• Coordinates diverse organizational jobs
• Cluster jobs into units
• Establish relationship among individuals, groups and
departments.
• Established formal line of authority
• Allocate and deploy organizational resources
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Six Elements of Structure
•
•
•
•
•
•
Work Specialization
Span of Control
Chain of Command
Authority (Responsibility and Power)
Centralization
Departmentalization
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Organization Design and Structure
• Organization design
– A process in which managers develop or change their
organization’s structure reflected in organization chart
– It involves decisions about six key elements:
•
•
•
•
•
•
Work specialization
Departmentalization
Chain of command
Span of control
Centralization
decentralization
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Work specialization
A component of organization structure that involves having
each discrete step of a job done by a different individual
rather than having one individual do the whole job
Using the concept of work
specialization
Broadened the job scope and
reduce work specialization
Organzing --- S.M.Fahim
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Organizational Structure:
Control
• Chain of command
– The management principle that no person
should report to more than one boss
• Span of control
– The number of subordinates a manager can
direct efficiently and effectively
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Chain of Command
Organzing --- S.M.Fahim
EXHIBIT 85.2
Organizational Structure: Control
(cont’d)
• Authority
– The rights inherent, the legitimacy, in a
managerial position to give orders and expect
them to be obeyed
• Power
– An individual’s capacity to influence decisions
• Responsibility
– An obligation to perform assigned activities
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Types of Organizational
Authority
• Line authority
– The position authority (given and defined by
the organization) that entitles a manager to
direct the work of operative employees
• Staff authority
– Positions that have some authority (e.g.,
organization policy enforcement) but that are
created to support, assist, and advise the holders
of line authority
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Line Versus Staff Authority
EXHIBIT 5.3
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Authority Versus Power
EXHIBIT 5.4a
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Types of Power
Coercive power
Power based on fear.
Reward power
Power based on the ability to distribute
something that others value.
Legitimate power Power based on one’s position in the
formal hierarchy.
Expert power
Power based on one’s expertise,
special skill, or knowledge.
Referent power
Power based on identification with a
person who has desirable resources or
personal traits.
EXHIBIT 5.5
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Centralization And Decentralization
• Centralization
– A function of how much decision-making
authority is pushed down to lower levels in an
organization; the more centralized an
organization, the higher the level at which
decisions are made
• Decentralization
– The pushing down of decision-making
authority to the lowest levels of an organization
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The Degree of Centralization
Lower
Higher
Employee Empowerment
Top Management Control
Decentralization
Centralization
Higher
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Lower
15
Types of Departmentalization
(Reflected in Organizational Chart)
Product
Functional
Process
Customer
Geographic
EXHIBIT 5 .6
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Centralization/Decentralization
• More Centralization
– Environment is stable
– Lower level manager are
not capable or
experienced decision
making at higher level
– Decisions are significant
– Organization is facing a
crisis of the risk of
company failure
• More Decentralization
– Environment is complex
– Lower level mangers are
capable and experienced
at decision making
– Lower level mangers want
a voice in decision
– Decisions are relatively
minor
– Corporate culture is open
to allowing mangers to
have a say in what
happens
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Departmentalization
• Functional departmentalization
– The grouping of activities by functions performed
• Product departmentalization
– The grouping of activities by product produced
• Customer departmentalization
– The grouping of activities by common customers
• Geographic departmentalization
– The grouping of activities by territory
• Process departmentalization
– The grouping of activities
by work or customer flow
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Departmentalization
Functional departmentalization
Plant Manger
Manager Engineering
Manager Accounting
Manager HR
Manager
Manufacturing
Manager
Purchasing
+ Efficiencies from putting together similar specification and
people with common skills knowledge and orientation
+ Coordination within functional area
+ in-depth specialization
-- poor communication across functional areas
-- limited view of organizational goals
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Departmentalization
Geographical departmentalization
Vice President for sale
Sales Director
Western region
Sales Director
Southern Region
Sales Director
Midwestern region
Sales Director
Eastern region
+ more effective and efficient handling of specific regional issue that
raise
+ serve needs of unique geographic markets better
-- duplication of function
-- can feel isolated from other organizational area
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Departmentalization
Product Departmentalization
Bombardier , Ltd
Mass transit sector
Mass Transit
division
Recreational Product
division
Recreational and utility
vehicles sector
Rail product sector
Rail and diesel
product Division
BombardierRotax
Logistic equipment
division
Industrial equipment
division
Organzing --- S.M.Fahim
BombardierRotax
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Departmentalization
• Product Departmentalization
• Allows specialization in particular products and services
• Mangers can become experts in their industry
• Closer to customer
• Duplication of functions
• Limited view of organizational goals
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Departmentalization
Process Departmentalization
Plant superintendent
Sawing department
manger
Planning and milling
Department manger
Finishing department
manger
Inspection and
Shipping
department
manger
+ More efficient flow of work activities
- can only be used with certain types of products
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Departmentalization
Customer Departmentalization
Director of sale
Manager retail
accounts
Manager wholesale
accounts
Manger Government
accounts
+ customer’s needs and problems can be met by specialists
-duplication of functions
- limited view of organizational goals
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Cross Functional Teams
• Groups of intervals who are experts in
various specialties who work together
Thermos Corporation
(known as worldwide for its beverage containers and lunch boxes
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Formalization
• The degree to which jobs within the
organization are standardized and the extent
to which employee behavior is guided by
rules and procedures
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Mechanistic and Organic
Organizations
• Mechanistic organization
– The bureaucracy; a structure that is high in specialization,
formalization, and centralization
– An organizational design that’s rigid and tightly controlled
• High specialization
• Rigid departmentalization
• Narrow span
• High formalization
• Limited information network ( mostly downward
communication)
• Little participation in decion making by lower-level employees
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Organic organization
• An advocacy; a structure that is low in specialization,
formalization, and centralization
• An organizational design that’s highly adaptive and
flexible
–
–
–
–
–
Division of labors
Jobs are not standardized
Employees are highly trained and empowerment
Employee teams
Minimal formal rules and little direct supervison
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Mechanic vs. Organic structure
• Mechanic
–
–
–
–
–
–
• Organic
High specialization
Rigid departmentalization
Clear chain of command
Narrow span of control
Centralization
High formalization
–
–
–
–
–
–
Organzing --- S.M.Fahim
Cross functional teams
Cross hierarchical teams
Free flow of information
Wide spans of control
Decentralization
Low formalization
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What determines best
structure?
The Leader
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Organization Design
Applications
• Simple structure
– An organization that is low in specialization and
formalization but high in centralization
• Functional structure
– An organization in which similar and related
occupational specialties are grouped together
• Divisional structure
– An organization made up of self-contained units
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Few
Departments
Wide Spans
of Control
The Simple Structure
Little
Formalization
Centralized
Authority
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Functional Structure
EXHIBIT 5.8
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Divisional Structure
EXHIBIT 5.9
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Strengths and Weakness of Common Traditional
Organizational Designs
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Other Organizational Structures
• Matrix structure
– Matrix Structure - assigns specialists from different
functional departments to work on projects led by
project managers
• adds vertical dimension to the traditional horizontal
functional departments
• creates a dual chain of command
– violates unity of command
– project managers have authority in areas relative
to the project’s goals
– functional managers retain authority over human
resource decisions (e.g., promotions)
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A Matrix Organization in an
Aerospace Firm
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Other Organizational Structures
– Team-Based Structures - entire
organization is made up of work teams
• employee empowerment is crucial
• teams responsible for all work activity and
performance
• complements functional or divisional
structures in large organizations
– allows efficiency of a bureaucracy
– provides flexibility of teams
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Matrix Organizations
Advantages
• Access to expertise.
• Stability of permanent
department
assignments for
employees.
• Allows for focus on
specific projects,
products, or customers
Disadvantages
• Confusion of
command.
• Power struggles and
conflicts.
• Lost time in
coordinating.
• Excess overhead for
managing matrix
functions.
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Other Organizational Structures
– Boundary less Organization - design is not defined by,
or limited to, the horizontal, vertical, or external
boundaries imposed by a predefined structure
• strategic alliances break down barriers between the
company and its customers and suppliers
• seeks to eliminate the chain of command, to have
limitless spans of control, and to replace
departments with empowered teams
• flattens the hierarchy by removing vertical
boundaries
• horizontal boundaries removed by organizing work
around processes instead of functional departments
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The Team-Based
Structure
Empower
Workers
Hold Teams
Accountable
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The Boundary less
Organization
Limited
Chain of
Command
Widened
Spans of
Control
Organzing --- S.M.Fahim
Empowered
Employee
Teams
42
Learning Organization
• An organization that has developed the capacity to
continuously adapt and change because all
members take an active role in identifying and
resolving work-related issues.
–
–
–
–
Organization design
Information sharing
Leadership
Organizational culture
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Characteristics of a Learning
Organization
Source: Based on P.M. Senge. The Fifth Discipline: The Art and Practice of Learning Organizations (New
York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans and S. M. Lee. “New Paradigm Organizations:
From Total Quality to Learning to World Class,” Organizational Dynamics (Winter 1994) pp. 4–19
Organzing --- S.M.Fahim
EXHIBIT 5.11
44